July 07, 2014

Apple, which outsources assembly of iPhones and iPads to Foxconn, accounts for about 48 percent of Hon Hai's revenue, according to Bloomberg Industries.Foxconn's Chairman Terry Gou recently urged shareholders to have patience as Hon Hai's sales slow. Foxconn, the key iPhone manufacturer for Apple, and China's largest private employer, also plans to boost investment in robotics and add more high-skilled positions as Gou strives to meet his goal for profit growth of 10 percent. This tidbit of information about robot investment somehow has led to the latest rumor about the iPhone 6 being made with robots. A contradictory report out of China today puts that rumor into question.

A few Apple news sites that are backing this rumor thus far are pointing to the GSM Dome report stating the following: "Foxconn may replace human employees with robots, at least those associated with the production line of the iPhone. During a recent shareholder meeting, Hon Hai Group CEO, Terry Gou detailed the process. He claims that robot testing has entered the final testing phase.Apple will have priority to use these Foxbots, as the official calls them."

However, we reported back in 2013 that Hon Hai had been experimenting with Robots since the iPhone 5, having 100 robots on their production line. But the robots weren't able to take over production for many reasons.

In reality, things may not have progressed since then as hoped. According to a new report published today in China titled "Foxconn recruitment spree shows automation plan setback," we're able to see that the rumor of super robots taking over the production of the iPhone 6 were basically hyperbole.

The report states that "Foxconn Technology Group is reportedly planning to recruit 100,000 workers in mainland China for the production of Apple's iPhone 6."

The report further notes that "A vendor supplying equipment for automated production said that technically it is not a major problem for Foxconn to replace human workers with robots. However, using robots on the production line is only cost-effective for making homogeneous products and cuts cannot realistically be made in making mobile phones and tablet devices which have a more complicated manufacturing process, the vendor stated."

That line of thinking echoes the same thing stated in our 2013 report where Foxconn noted that "The tasks may appear simple, but robots cannot be used to perform them because they lack decision-making ability."

The latest report states that "The labor-intensive industry, such as OEM, can no longer sustain the company's growth," Gou said at a shareholder meeting on June 25. He further said that the company has been seeking a transformation of its business model in the past few years, which is expected to be crucial for Foxconn's continued growth in the next decade.

However, Foxconn's transformation has been slow and the group has suffered a number of setbacks."

In other words, Hon Hai will be moving to more robots over people for production over the next decade. But that's a far cry from the rumor claiming that robots will take over the production of an important product like Apple's iPhone 6.

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